Prime Minister Abiy Ahmed's government announced that Ethiopia expects the economy to expand by 10.2% in the 2025-26 fiscal year, a projection that raises eyebrows given the country's recent history of civil war, inflation crises, and forex market turbulence.
The forecast, reported by Reuters, comes as the Horn of Africa nation attempts to rebuild after the devastating Tigray conflict that killed hundreds of thousands and displaced millions between 2020 and 2022.
Ambitious—or Aspirational?
Double-digit growth projections from African governments are not uncommon, but they often serve political purposes as much as economic ones. Ethiopia faces parliamentary elections in the coming years, and Abiy Ahmed's administration has staked its legitimacy on promises of economic transformation.
The question economists are asking: is this legitimate recovery, or political optics?
Ethiopia did implement significant forex reforms in 2024, floating the birr and beginning painful structural adjustments demanded by the International Monetary Fund. Those reforms triggered immediate inflation spikes—food prices soared, and ordinary Ethiopians saw their purchasing power collapse overnight.
Yet those same reforms unlocked billions in IMF support and opened access to international debt relief under the G20's Common Framework. For the first time in years, Addis Ababa has breathing room to attract foreign investment.
Where Is the Growth Coming From?
The government has pointed to several sectors driving projected expansion:
Agriculture, which employs 70% of Ethiopians, showed signs of recovery after drought and conflict disrupted harvests for years. Better rains and relative stability in farming regions have boosted output.
Services, particularly telecommunications and financial services, have expanded rapidly since the government allowed partial liberalization. The entry of Kenya's Safaricom into Ethiopia's mobile market in 2022 was a watershed moment, breaking the state monopoly and spurring competition.
Construction and infrastructure projects—roads, railways, industrial parks—continue at pace, much of it financed by Chinese loans. The Addis Ababa-Djibouti railway remains a critical artery for Ethiopia's import-dependent economy.
But tourism, once a growth engine, remains depressed. Foreign direct investment is still cautious. And the manufacturing boom that Abiy promised has yet to materialize at scale.
The Credibility Question
Ethiopia's statistical agency has a complicated relationship with transparency. Independent economists often find it difficult to verify government data, particularly during politically sensitive periods.
The World Bank's most recent estimates for Ethiopia's 2024-25 growth were closer to 6-7%—healthy, but nowhere near 10.2%. The IMF has been similarly conservative in its assessments.
Inflation, though cooling from its 2023 peak of over 30%, still hovers around 20%. That means even if nominal GDP grows by 10%, real purchasing power for ordinary Ethiopians may barely budge.
Post-Conflict Realities
The Tigray war formally ended with a peace agreement in late 2022, but reconstruction has been slow. Entire towns remain rubble. Hospitals lack equipment. Schools are shuttered. International donors, burned by previous promises, remain wary.
Meanwhile, new conflicts have erupted. Amhara region saw violent clashes between federal forces and local militias throughout 2023 and 2024. Oromia continues to face insurgency. Ethnic tensions simmer across the country's federal structure.
Can an economy grow at 10% while parts of the country remain unstable? Ethiopia's government says yes—that growth is concentrated in stable regions and that instability is localized, not systemic.
Critics argue that's exactly the problem: growth that doesn't reach conflict-affected populations isn't transformation, it's inequality.
A Test of Credibility
If Ethiopia does hit 10.2% growth, it will be a remarkable achievement—proof that post-conflict recovery is possible even in deeply fractured societies. It would vindicate Abiy Ahmed's painful forex reforms and validate the IMF's structural adjustment playbook.
If it doesn't, if growth comes in at 6% or 7% or stalls entirely, the political consequences will be severe. Ethiopians were told to endure inflation and austerity because prosperity was coming. If it doesn't arrive, faith in the system will erode further.
Addis Ababa has set the bar high. Now the world watches to see if Ethiopia can clear it.
54 countries, 2,000 languages, 1.4 billion people. In Ethiopia, 120 million of them are waiting to see if this promise is different.
